Sie unterhalten sich über den Film.

In this sentence, Sie can mean either:

• they
• you (formal)

It does not mean she here, because she in German is sie and would normally pair with a singular verb form such as sie unterhält sich.

The form Sie unterhalten sich is ambiguous on its own because:

• sie = they
• Sie = formal you
• both use the verb form unterhalten

So only the wider context tells you whether this means:

• They are talking about the film or
• You are talking about the film (formal)

Because sich unterhalten is a reflexive verb in German.

The basic expression is:

• sich unterhalten = to converse / to chat / to talk

So the reflexive pronoun is part of the verb pattern. In this sentence:

• Sie unterhalten sich = they are talking / conversing

The reflexive pronoun changes depending on the subject:

• ich unterhalte mich
• du unterhältst dich
• er/sie unterhält sich
• wir unterhalten uns
• ihr unterhaltet euch
• sie/Sie unterhalten sich

So sich here does not literally mean themselves in a very strong English sense; it is just required by the German verb.

Yes — unterhalten can mean different things depending on whether it is reflexive.

Without a reflexive pronoun:

• jemanden unterhalten = to entertain someone

Example:

• Der Clown unterhält die Kinder. = The clown entertains the children.

With a reflexive pronoun:

• sich unterhalten = to converse / chat / talk

Example:

• Wir unterhalten uns. = We are talking.

And very often:

• sich über etwas unterhalten = to talk about something

So in your sentence, the reflexive sich is what tells you this means talk/converse, not entertain.

Because sich unterhalten über is the standard pattern for talking about something.

So:

• sich unterhalten über + accusative
• to talk about + something

Here:

• über = about
• den Film = the film (accusative)

So:

• Sie unterhalten sich über den Film. = They are talking about the film.

Because über here takes the accusative case when it means about in this expression.

The noun Film is masculine:

• nominative: der Film
• accusative: den Film

Since the phrase is:

• sich über etwas unterhalten

you need the accusative:

• über den Film
• über das Buch
• über die Musik

So den is there because Film is masculine and the structure requires the accusative.

Über is a two-way preposition, which means it can take either:

• accusative
• dative

depending on meaning.

But in the expression sich über etwas unterhalten, it takes the accusative.

Accusative:

• Wir sprechen über den Film.
• Sie unterhalten sich über das Problem.

Dative:

Dative is used in other meanings, especially location:

• Das Bild hängt über dem Tisch. = The picture hangs above the table.

So in your sentence, über means about, and that calls for the accusative.

It is not a separable verb here.

The verb is simply unterhalten, used reflexively:

• sich unterhalten

What you are seeing is normal German sentence structure:

• the conjugated verb comes early in the clause
• the reflexive pronoun appears later

So:

• Sie unterhalten sich ...

is not a split verb in the way that, for example, aufstehen becomes:

• Sie stehen auf.

Here, unterhalten stays as one verb; sich is just the reflexive pronoun that belongs with it.

It is in the present tense.

• Sie unterhalten sich über den Film. literally: They talk about the film natural English: They are talking about the film / They talk about the film

German present tense often covers both:

• simple present
• present progressive

So depending on context, this sentence could mean either:

• They are talking about the film or
• They talk about the film

In most everyday contexts, English would often translate it as are talking about.

Because the subject is either:

• sie = they or
• Sie = formal you

Both of those use the plural / formal verb form:

• sie unterhalten
• Sie unterhalten

Compare:

• er unterhält sich = he is talking
• sie unterhält sich = she is talking
• sie unterhalten sich = they are talking
• Sie unterhalten sich = you are talking (formal)

So unterhält would be singular, but unterhalten matches sie/Sie in this sentence.

Yes. That is very natural German.

• Sie sprechen über den Film. = They are talking about the film.
• Sie unterhalten sich über den Film. = They are talking about the film.

The difference is small:

• sprechen über is a very common, neutral way to say talk about
• sich unterhalten über can sound a bit more like have a conversation about or discuss

In many contexts, they are interchangeable.

In a normal main clause, the conjugated verb usually comes in second position, and the reflexive pronoun often comes shortly after it.

So:

• Sie unterhalten sich über den Film.

Structure:

• Sie = subject
• unterhalten = conjugated verb
• sich = reflexive pronoun
• über den Film = prepositional phrase

With other subjects:

• Ich unterhalte mich über den Film.
• Du unterhältst dich über den Film.
• Wir unterhalten uns über den Film.

So the reflexive pronoun changes form, but it generally stays near the verb.

Usually, it refers to more than one person, because:

• sie unterhalten sich = they are talking

But if Sie is formal, it could also refer to:

• one person: You are talking about the film. (formal singular)
• more than one person: You are talking about the film. (formal plural)

So without context, the sentence could mean:

• They are talking about the film
• You are talking about the film (formal)

That ambiguity is completely normal in German.